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6. Right after graduating from Drake, Gracie Vasquez bought a Chevrolet Camaro Coupe 155, V8 6.2L, with 426 horsepower, at $31,000 with 10% down and financed the rest with a five-year loan at 6% APR, compounded monthly. What is her monthly payment if she starts the payment one month after the purchase? Also, construct a monthly amortization schedule for your loan for first three months. 7. Minnesota Yikes, a football team under a salary cap problem, has offered Payton Maddening, a free agent QB, a 5-year contract of $1 million dollars a year for the next season with the payments growing at 7% per year for the next 4 years with a signing bonus of $5 million. Another team, Kansas City Cheaps, offered a 5-year contract of $2 million dollars a year for the next season with the payments growing at 8% per year for the next 4 years with a signing bonus of $1.2 million. Payton believes the discount rate for such payments is 15%. Which contract should Payton choose?

Answer 1

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Q6.

Total value of car = $31,000
% paid as down = 10%
Therefore, down amount = 31000*10% = 3100
Therefore, Amount financed = 31000 - 3100 = 27900

The formula for computing the Amount Payable is:

$A = P(1+\frac{r}{n})^{nt}$
Where,
P = the principle finance, i.e 27900
r = the rate of interest, i.e 11% or 0.11
n = number of times interest is compounded, i.e monthly, therefore 12
t = term of finance in years, i.e 5

Therefore, the total amount payable at the end of 5 years is:
$A = 27900(1+\frac{0.11}{12})^{(12*5)}$

A = 27900(1.7289)

Therefore, monthly payment is 48236.75 / 60 months = $804.4 per month.

Monthly amortization Schedule
Month	Opening Outstanding	Repayment	Closing Outstanding
1	48263.75	804.40	47459.35
2	47459.35	804.40	46654.96
3	46654.96	804.40	45850.56